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A Word on the Mortgage Market
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Hello and welcome to the latest edition of a word on the mortgage market. We do hope you are keeping well. We enter your inbox (when don’t we?) at a fairly pivotal moment for the UK mortgage market.
We’ve had a raft of recent economic announcements, a bank rate decision just yesterday and a budget in a few weeks’ time. As always, we will try and pick through it all and provide some guidance as to exactly what all this means for you and your mortgage.
Also, towards the end of this edition we have some thoughts that, if you are a Buy-to-Let landlord, you’ll probably want to have a read of.
So, let’s jump in.
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The global economic picture continues to evolve, with mixed signals on growth and inflation. In the UK, inflation held steady at 3.8% in September for the third consecutive month — slightly softer than forecast, but still almost double the Bank of England’s 2% target. Services inflation remains persistently high at 4.7%, while core inflation, which strips out food and energy, eased to 3.5%. Although the pace of price growth has slowed, the underlying data suggests inflation remains “sticky,” with the path back to target proving drawn out.
Gilt yields or government borrowing costs that influence long term mortgage rates have responded positively to the latest inflation figures, with the 10-year gilt falling to 4.4%, its lowest level since last December. This easing in yields indicates improving investor confidence and a growing belief that interest rates may begin to move lower in the coming months. However, with the Autumn Budget approaching (more on that to follow), government spending and tax decisions could soon play as big a role as interest rates in influencing market confidence.
Elsewhere, the US Federal Reserve delivered another quarter-point rate cut with possibly more to follow as policymakers noted signs of cooling employment and slower growth, even as inflation remains above target.
Across the Channel, the European Central Bank kept rates on hold for a third straight meeting, reflecting confidence that Eurozone inflation is nearing the 2% goal. Despite lingering global trade tensions, the outlook in Europe appears steadier than it has for some time.
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In the UK, the Bank of England held the base rate steady once again, but speculation is building that a quarter-point rate cut could come on December 18th . Just in time for Christmas. Which would be nice. This speculation was heightened earlier in the week with the pound falling towards $1.310, its weakest level since April, after Rachel Reeves’ speech signalling upcoming tax hikes.
If that cut doesn’t materialise next month, a rate cut in February appears almost inevitable. Still, the Bank remains cautious, wanting clearer and more consistent signs of easing inflation before loosening policy too much or too quickly.
Swap rates which are closely linked to bond yields and in turn determine the cost of fixed-rate mortgage funding, have dipped slightly in response to the steadier inflation backdrop. Two-year swaps are currently around 3.5%, with five-year terms close behind at 3.6%. This small convergence reflects greater confidence that rates will gradually fall over the medium term.
For lenders, however, competition remains tight, and many are waiting for clearer signals before adjusting product ranges more aggressively.
Lenders, brokers, the public and, indeed, more or less the whole world alike will also be watching how the upcoming Budget influences gilt markets and wider economic confidence. A calm, measured statement from the Chancellor could help maintain this fragile stability, while any hint of fiscal overreach could quickly shift the tone.
As always, this simply highlights the need to keep in contact with your adviser.
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What should borrowers do now?
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For borrowers, the coming weeks may bring more headlines than action — but that doesn’t mean it’s time to sit back. The Autumn Budget will be closely watched by markets, not least because memories of the last time a government shook investor confidence are still fresh. Remember September 2022 and the Truss-Kwarteng “mini budget”. While no one expects a repeat performance, it’s fair to assume the Chancellor will tread carefully to avoid unsettling gilt markets or mortgage pricing.
For those approaching the end of a fixed deal or considering a remortgage, the message remains the same: don’t delay unnecessarily. Locking in a new fixed rate now can provide valuable certainty at a time when rates appear to have peaked but remain sensitive to policy announcements. If the Budget is well received, rates could drift lower — but if it prompts market nerves, the recent calm could quickly evaporate.
Overall, the economy is in a broadly stronger position than a year ago, given recent data showing economic growth that exceeded expectations and both the government and the Bank of England seem committed to avoiding surprises. While predicting short-term moves is impossible, making well-timed, informed decisions remains the best defence against market volatility. At the risk of repetition, that’s where we come in.
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New Rules for the Rental Market
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The recently passed Renters’ Rights Act 2025 brings major reform to the private rented sector in England. Amongst the changes the Act abolishes “no-fault” evictions under Section 21 and replaces fixed-term tenancies with periodic ones, it limits rent increases to just once a year, it and limits landlords demanding more than one months rent in advance this marks a significant shift in how landlords and tenants interact. For many, this will mean reviewing notice periods, tenancy documentation, and management processes to ensure compliance before the new rules come into effect early next year.
For Buy-to-Let investors, the impact will be tangible. While rental income remains solid, the landscape is changing: rent increases can now be more closely scrutinised, bidding wars are banned, and a new Private Rented Sector database and Ombudsman system will provide greater oversight. Landlords are calling for a transition period to help adapt, but even with that in place, the emphasis will increasingly fall on robust record-keeping and good tenant relationships.
Now is the ideal time to review your lettings strategy. Check that agreements and safety documents are up to date, reassess your cash-flow model, and prepare for longer-term tenancies with fewer opportunities for turnover. We’re closely monitoring these developments and will continue to keep you informed and supported as the changes take effect.
If you’d like to discuss this, do speak to your adviser who will be happy to talk you through the implications in more detail.
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We very much hope you've found A word on the mortgage market useful and interesting. If you'd like to discuss anything we've talked about. Or indeed if you have any other mortgage related needs, then please do get in touch with your adviser. Until next time, we bid you adieu.
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Of course, you know this, but it never hurts to remind you that:
YOUR HOME OR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP REPAYMENTS ON YOUR MORTGAGE OR OTHER LOANS SECURED UPON IT.
We should also remind you that if you have an interest-only mortgage please make sure you have a suitable and viable method to repay your mortgage at the end of the term.
And some of the products contained in this newsletter are non-regulated, such as Buy to Let mortgages and, accordingly, the protection that is normally afforded on regulated products do not apply.
Interest rates may go up as well as down. Make sure you can afford your mortgage repayments and review your budgets frequently. Should you experience or foresee any difficulties, speak to your lender immediately. For advice in relation to your circumstances on a specific matter, please ask us for a personal illustration.
Each advising firm is owned independently and they will set out the way they work in the initial disclosures to you and are directly authorised and regulated by the Financial Conduct Authority. Mortgage Force (UK) Ltd is registered in England and Wales No: 09394027.
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